Melbourne, Brisbane apartment prices tipped to fall for next two years: NAB

Brisbane and Melbourne’s property markets are tipped to see falls in apartment prices in the next two years, one of the big four banks has forecast. But Sydney prices are likely to keep growing.

National Australia Bank has halved its expectation for national apartment price growth this year – to 3 per cent , down from previous forecasts of 6.8 per cent.

It has also downgraded its national house price forecast to 5 per cent in 2017 – compared to the 7.2 per cent previously anticipated.

Rising supply is one of the reasons behind anticipated price falls for apartments in some cities. Photo: James Brickwood

In some states, this worsening outlook is expected to be more dramatic.

By the end of 2017, Melbourne’s unit prices are expected to have dropped 2.6 per cent, followed by a further fall of 2.4 per cent in 2018, NAB has forecast in its Quarterly Australian Residential Property Survey released on Thursday. 

For a $500,000 apartment, this could see the price fall to $487,000 in 2017 and to $475,312 in 2018.

Similar apartment price falls are likely in Brisbane, with a 2.2 per cent fall anticipated in 2017 and a 1.8 per cent drop next year.

In Sydney, apartment and house price growth will moderate but won’t decline. Apartments are anticipated to grow by 0.5 per cent in 2018, compared to 6.4 per cent growth this year.

In the latest quarter recorded – June – housing sentiment fell after reaching a three-year high in March. This decline was also seen in NSW and Victoria, but they were still the top performing states compared to the rest of Australia.

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But this falling confidence is likely to translate into lower house price and rent expectations, NAB chief economist Alan Oster said.

For house price growth, Queensland, NSW and Victoria would lead the country for the next 12 months, despite a slowing anticipated across most states.

“Rents are also expected to slow, but tipped to outpace house price growth. This suggests that yields may start widening after a long period of compression, especially in Victoria and NSW,” Mr Oster said.

In two years time, he expects Western Australia and Queensland will be top performers for property price growth – with Victoria the weakest.

​”Our expectations around subdued wages growth remain, suggesting affordability will be a major constraint on the market, especially if credit conditions continue to tighten.

“This along with record levels of housing construction activity … and moves to limit foreign demand for housing will likely limit the potential for future price gains.”

He expects this will bring Sydney and Melbourne back to more sustainable levels.

But not all experts agree Melbourne is likely to experience price declines. Domain Group chief economist Andrew Wilson said falls in Brisbane’s apartment prices were a “no brainer” but he thought Melbourne declines would be “unlikely”.

“There has been a collapse in supply in Melbourne recently… there have been no high-rises approved in the City of Melbourne so far this year,” Dr Wilson said.

“We’re still seeing record levels of migration – all the key drivers are still there.”